Real business cycle theory explains the business cycle as the result of
A) unstable investment demand.
B) fluctuations in productivity.
C) excess growth of the quantity of money.
D) shocks to consumer spending habits.

Question

Quizplus · Accepted Answer

Real business cycle theory attributes fluctuations in the business cycle to changes in productivity, such as technological advancements or changes in labor productivity. It does not focus on changes in investment demand, the quantity of money, or consumer spending habits as the main drivers of economic cycles.

Real Business Cycle Theory Explains the Business Cycle as the Result